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February 06, 2005

"They own everything. That's why I went into the restaurant business." --Ted Turner, on big media companies and their continuing consolidation

Should partners in law and accounting firms be entitled to sue if they face age, race, or sex discrimination? Right now, federal law doesn't let them -- on the theory that partners are owners, not employees. But this could change if the Equal Employment Opportunity Commission eeoc) wins a recent suit it brought against Sidley Austin Brown & Wood, one of the nation's largest law firms. The agency charges that the 1,400-lawyer firm discriminated against 31 former partners over age 40 who were demoted or forced to leave in a 1999 restructuring.

Sidley says that the EEOC's charges have no merit because the firm's partnership status exempts it from federal discrimination law. But the EEOC is questioning the Sidley partnership and maintains that the firm is run by small management committees -- like most other big law and accounting firms.

Sidley partners do share profits and loss liabilities, so the outcome isn't clear. But "if the government wins, it could put all large partnerships at risk of lawsuits," says Mark Dichter, a partner at Morgan, Lewis & Bockius, which isn't involved in the suit.

Vaccine makers are getting a boost from the Bill & Melinda Gates Foundation. On Jan. 24, the Gateses gave $750 million to the Global Alliance for Vaccines & Immunization gavi) -- their second contribution. The money, spread over 10 years, guarantees the $7 billion vaccine industry a big market. Says Gates: "We're going to be buying a lot of vaccines."

Already, GAVI has helped speed vaccine rollout. Companies typically introduce new vaccines in wealthy nations -- waiting years, even decades, before taking vaccines to the developing world. But with funding and distribution help from GAVI, GlaxoSmithKline (GSK) has just begun selling its vaccine for rotavirus -- which causes diarrhea and dehydration, and kills 500,000 children a year -- in Mexico first. Merck (MRK) will shortly follow suit. Dr. Adel Mahmoud, head of Merck's vaccine unit, says GAVI proves "there's a market and funds."

Governments, too, have been spurred by the Gates largesse. Norway pledged $290 million to GAVI this week, and Britain is considering a $1.8 billion pledge. GAVI's aim to inoculate 90% of the world's poor by 2015 would save an estimated 10 million lives. To meet such demand, vaccine makers could see double-digit growth for years to come.

It has been a year since Congress passed, with much ado, the CAN-SPAM Act, which set restrictions on unsolicited e-mail. But the law, which took effect on Jan. 1, 2004, has done little to stop junk messages. In fact, a new report by e-mail security outfit MX Logic says 97% of unsolicited commercial e-mail still flouts the law.

Forgive industry experts if they say: "I told you so." The law does not address the underlying technology that aids spammers. "They invade PCs or bounce the messages from host to host, making it almost impossible to get to the source," says Andrew Lochart of e-mail security provider Postini.

To be sure, a handful of unlucky spammers are being prosecuted. On Jan. 13, the Texas attorney general filed the state's first CAN-SPAM lawsuit against University of Texas student Ryan Pitylak, the head of the world's fourth-largest spam ring, according to watchdog agency Spamhaus. Pitylak didn't return calls.

Still, "people should not have a false sense of comfort from any statute that purports to crack down on this," says a spokesman for California Attorney General Bill Lockyer. Indeed, judging by the traffic, most spammers are staying one step ahead of the law.

In a big step into a small niche, Gap's (GPS) Banana Republic chain is planning its first stores catering to women 5 ft. 4 in. and under, BusinessWeek has learned. The stores, to be called Banana Republic Petites, will open in Boston, Los Angeles, and Seattle in February. Like other apparel chains, Banana now stocks only a limited petite selection at its 440 outlets. Banana, making up 13% of Gap's estimated $16 billion in sales, won't say how many Petites stores it's planning. After sales gains through 2004, Banana's progress slowed lately. Giving petite customers a place of their own could help it sell more of those crepe suits and little black dresses.

Tech outsourcing may be ripe for consolidation. Half the 150 CIOs surveyed by Merrill Lynch (MER) say they won't do deals with firms with "junk" credit ratings, which includes Electronic Data Systems (EDS), Capgemini, and BearingPoint (BE).

The concern: Staying power -- since deals are multiyear. The weaker companies risk falling into a "downward spiral," making them vulnerable to consolidation if they can't cut deals, says Merrill analyst Gregory Smith. Those with junk ratings say the designation hasn't hurt their ability to win contracts.

If you had to guess the name of a big-time executive with his own blog, who would come to mind? Apple's (AAPL) Steve Jobs? The Google (GOOG) guys? How about a 72-year-old auto exec in rusty ol' Detroit? General Motors (GM) new-car czar Robert Lutz started a blog at www.fastlane.gmblogs.com with a mission to gin up enthusiasm for new GM cars and parry the jabs of critics.

In other words, Lutz is doing a little PR. Lutz does his own writing, but his staff selects e-mails from his 4,000 daily visitors for him to answer. Lutz, for instance, replied to charges that the two stylish new Saturn models that GM displayed at the Detroit auto show wouldn't have as much pizzazz when they hit later this year. Lutz countered that they are production-ready.

That's about as provocative as it gets. But stay tuned: As Lutz, who declined to be interviewed, wrote in his first blog on Jan. 5: "After years of reading and reacting to the automotive press, I finally get to put the shoe on the other foot."

The global electronics industry is facing tough new environmental regulations that will require the redesign of thousands of products from TVs to cell phones. Two directives from the European Union that limit the use of toxic substances in electronics and require manufacturers to pay for recycling used goods are set to go into effect in the next 18 months.

Under the new rules, electronic equipment must be free of lead and other heavy metals. Companies also have to navigate as yet murky rules for collecting, disassembling, and disposing of old gear. "We can't estimate how much this will cost us," says Claudia Martens, corporate affairs manager at Hewlett-Packard, Europe's No. 1 PC seller. Brussels-based electronics trade group Orgalime figures the new requirements could cost the industry $40 billion for redesign, retooling, and recovery of waste, plus another $3 billion in ongoing annual costs.

The directives are aimed at the growing tide of e-waste and noxious chemicals pouring into landfills across Europe. This summer, companies will have to start recovering old products. And by July 1, 2006, six substances, including lead, cadmium, mercury, and chromium-6, will be banned in almost all electronics products. That could have a profound effect on the industry because nearly every product on the market uses lead-based solder to secure chips to printed circuit boards.

Manufacturers such as Nokia (NOK) and Philips Electronics (PHG) plan to apply the standards worldwide to avoid duplication of their product lines. So do U.S. companies such as HP and Dell, which say they'll be ready in time but worry about logistical hiccups. Europe's green policies have even been copied by China. "Everybody is following Europe's lead on this," says Greg Monty, director of corporate R&D at Underwriters Laboratories in Northbrook, Ill.

One big exception: the U.S., where a few dozen states such as California and Massachusetts ban lead or require recycling. But that could change as the waste problem grows. Market researcher Gartner Group (IT) forecasts Americans will replace or retire 133,000 PCs per day this year alone.

Activists also are turning up the heat: Protesters at the recent Macworld show in San Francisco put up a banner reading "From iPod to iWaste," to highlight the difficulty of replacing and recycling batteries for the popular digital music players. Looks as if electronics makers will face more green mandates in years to come.